Angelo R. Mozilo struggled last week to bid farewell to No. 1 home lender Countrywide Financial Corp., the company he led for 39 years only to see it toppled by misadventures in high-risk mortgages.
The usually silk-smooth Mozilo garbled words and at one point knocked over his microphone at a special shareholder meeting. Looking grim and sounding resigned, he said the era of independent home lenders like Calabasas-based Countrywide was at an end. Still, he added, "Countrywide is a great American story."
Few would dispute that assertion. But as Bank of America Corp. takes over Countrywide today, some observers are portraying Mozilo as the headstrong protagonist in the lender's saga who became blinded by ambition and pride -- and helped create the national housing fiasco.
"He was an admired and feared competitor," said Paul Muolo, an editor at industry newsletter National Mortgage News and co-author of a book on the lending debacle, "Chain of Blame," that is due out this month. "But now his reputation is trashed."
Mozilo, the 69-year-old son of a Bronx butcher, didn't respond to requests for details of his plans for the future. Former associates said they assumed Mozilo, married for 50 years and a grandparent many times over, would spend time with his family and defending himself against lawsuits.
Mozilo's downfall was his lust to have Countrywide become the biggest provider of every kind of mortgage, Muolo said. That included sub-prime loans for people with poor credit or heavy debt loads and also "option ARMs," the tricky adjustable-rate loans that allowed borrowers to pay so little that their balance could rise instead of fall.
Citing problems with those and other complex mortgages, the attorneys general of California and Illinois sued Mozilo and Countrywide last week, alleging that borrowers were buried in unaffordable loans as a result of unfair and misleading business practices. Florida filed a similar suit on Monday. The goal was to rack up revenue by selling loans in bulk on Wall Street, the suits alleged; Mozilo and Countrywide declined to comment.
Mozilo also faces investigations by the Securities and Exchange Commission and federal prosecutors into his exercises of stock options that allowed him to pocket millions of dollars while Countrywide's fortunes worsened. And his reputation for regarding Countrywide as a personal fiefdom has been reinforced by recent accounts of how he intervened on behalf of politicians, athletes and other "friends of Angelo" to give them mortgages on highly favorable terms.
Bank of America, which initially invested $2 billion in Countrywide last August, agreed in January to buy the lender outright for an additional $4 billion in stock. The deal's value has since tumbled to $2.5 billion as Bank of America's share price has declined, partly out of concern about the wisdom of the acquisition. Early last year, Countrywide was worth more than $25 billion on paper.
Ken Lewis, Bank of America's chief executive, made clear from the start that Mozilo would depart after the deal closed, with Bank of America's more conservative management and lending styles to prevail. Countrywide President David Sambol initially was tapped to run the combined mortgage operations but BofA later said one of its longtime executives would be sent to Calabasas to fill that post.
Mozilo began his career at 14 as a part-time messenger for a Manhattan mortgage lender. He worked his way up, eventually attended college at night and moved to Virginia and then Florida after the Manhattan firm merged with a Southern lender. When a conglomerate bought the business in 1968, Mozilo resigned and the next year opened what was initially Countrywide Credit Industries with his former boss, David Loeb.
The sharp-dressing Mozilo was 30, with a wife and three children, when he headed for Southern California, Muolo and co-author Mathew Padilla write in their book. California's population and home sales were booming, and Mozilo, a tireless salesman, began opening four-person retail offices in the 1970s for Countrywide, which moved its headquarters from New York to Pasadena and then Calabasas.
Countrywide started out making so-called government loans -- mortgages that could be insured by the Federal Housing Administration or guaranteed by the Veterans Administration. The company expanded into traditional mortgages that could be sold to Fannie Mae and Freddie Mac, the government-sponsored mortgage buyers, and became Fannie Mae's largest supplier after the savings and loan meltdown of the late 1980s left many of its rivals in ruin.
That relationship was how Mozilo became close with former Fannie Mae Chairman James A. Johnson, one of many prominent people, including two U.S. senators and two former Cabinet members, whom Mozilo reportedly helped get loans on better terms than generally available to the public.
But such personal favors were a sideshow compared with Countrywide's biggest blunder -- its full-on push this decade into sub-prime lending, taking on independent niche players like Ameriquest Mortgage Co. and New Century Financial Corp., and option ARMs, where the competition was thrifts such as World Savings of Oakland, Washington Mutual of Seattle and IndyMac Bank of Pasadena.
As the competition intensified for these risky loans in 2006, Countrywide joined the other lenders in relaxing its standards for borrowers, allowing lower credit scores and higher loan balances. In many cases, it lent without documenting borrowers' incomes.
As defaults mounted in late 2006 and early 2007, Mozilo swore he would ride out the industry's turmoil and emerge bigger than ever. But it was not to be.
"I've always told my colleagues at Countrywide not to fear change but instead to embrace it," Mozilo said Wednesday as shareholders voted to approve the sale of Countrywide to Bank of America.
"This has been a difficult time for all of us involved at Countrywide. But I have learned over the past year that it's not only change that must be embraced, but the inevitable."
The end of the Countrywide story was "a total disaster," Muolo said. "His ego sank him. . . . He had to be first in everything."